Retired California teachers challenge reductions to monthly retirement benefits

Over 30 retired teachers formerly employed by the Salinas Unified High School District recently filed a petition against the school district and against the California State Teachers’ Retirement System (CalSTRS).

CalSTRS – the defendant in the case of Blaser et al. v. California State Teachers' Retirement System – was the state agency responsible for managing contributions made by employees and by member school districts to the State Teachers’ Retirement Fund.

In 2016, the retired teachers challenged reductions that CalSTRS made and continued to make to their monthly retirement benefits after determining that the school district had made errors in its reporting. They claimed that these errors led to an overstatement of their monthly benefits.

In 2017, the trial court granted the retired teachers’ petition. The trial court said that CalSTRS’s claims to reduce the retirement benefits and to collect overpayments were time-barred.

In 2019, a panel of the California Court of Appeal reversed the trial court’s decision. The panel made the following findings:

• The continuous accrual theory was applicable
• The trial court wrongly held that CalSTRS’s efforts to recoup overpayments were time-barred in relation to both past and future monthly retirement payments
• CalSTRS was not barred from adjusting to the correct amounts the monthly benefit payments accruing on or after Feb. 1, 2013 and was not barred from asserting claims for prior overpayments for periodic benefits accruing on or after that date

The panel returned the case to the trial court for further proceedings to decide the issues of whether the retired teachers forfeited the defenses of equitable estoppel and laches by failing to assert them and whether such defenses barred CalSTRS’s adjustment of benefits and its claims for overpayments of prior benefits.

On both issues, the trial court ruled in the retired teachers’ favor. It held that forfeiture did not bar the retired teachers from asserting equitable estoppel and laches and that both defenses were applicable to this case. The trial court ordered CalSTRS to stop reducing the monthly pension benefits and to stop seeking recovery of claimed overpayments.

The California Court of Appeal for the Sixth District reversed the trial court’s order and directed it to issue a new judgment. The appellate court ruled that the retired teachers could not assert the defenses of equitable estoppel and laches.

One could not invoke equitable estoppel to directly contravene statutory limitations, the Court of Appeal noted. In this case, applying equitable estoppel would require CalSTRS to continue miscalculating the monthly pension benefits of the retired teachers in a way that contravened the Education Code, the appellate court said.

The defense of laches was also unavailable here, the Court of Appeal held. One could not assert this defense to negate the appellate court’s earlier determination that CalSTRS was not barred from making benefit adjustments or from asserting overpayment claims for benefits accruing on or after Feb. 1, 2013, the appellate court explained.